Good morning. Another tricky day while the FTSE flirts with the 6800 area and just chops around that area. We had the initial long which managed to get a few points but the bulls never really got going and it remained weak pretty much all afternoon. In stark contrast to the Dax which took off like a rocket from 9620 to 9690 in the space of 40 minutes. The FTSE has hit the overnight low at 6770 and actually performed a bit of a bounce, being 6795 as I write this. The bulls need to get above 6815 to have any mediocum of safety. New home sales yesterday in the US exceeded expectations which kept the S&P strong. We have a fair bit of Euro news out today, as well as Yellen testifying on monetary policy at 15:00.
Another sign of a market top is over the top IPO’s and AO.com’s yesterday fitted the mould. Just like cities building skyscrapers show over the top boom times, increased M&A activity and a rush of IPO’s often shows market tops. Somethign to bear in mind while the FTSE is still testing the bottom of the daily channels – it will need to bounce today.
Asia Overnight from Bloomberg
Commodities fell, with copper heading for a seventh day of losses, amid speculation the Federal Reserve will continue stimulus cuts. Australia’s dollar weakened with emerging-market currencies and precious metals.
The S&P GSCI Index of 24 commodities fell 0.2 percent by 3:14 p.m. in Tokyo, with copper slipping 0.2 percent and silver declining 0.6 percent. The Aussie weakened 0.3 percent versus the dollar after private investment fell the most since 2009. Turkey’s lira led a gauge of developing-economy currencies toward a second day of losses. Gains by Hong Kong shares helped the MSCI Asia Pacific Index pare today’s decline to 0.1 percent. Standard & Poor’s 500 Index futures rose 0.2 percent.
Fed Chair Janet Yellen testifies before the Senate today as the U.S. issues data on jobless claims and durable goods orders. China’s central bank drained cash in money-market operations today for the fourth time in two weeks after the benchmark rate for interbank loans dropped to a seven-month low. Australian (GACGB10) government bond yields declined after data showed business investment shrank more than economists estimated in the quarter through December.
“The markets are just churning around,” said Shane Oliver, the Sydney-based head of investment strategy at AMP Capital Investors Ltd. in Sydney, which oversees $131 billion. “The global economy is on track to pick-up pace this year but we’re just going through one of those thin patches in markets at the moment. There’s ongoing concern about China and there’s a bit of nervousness around.”
US
Yellen said this month the economy can weather cuts to the Fed’s bond buying program, adding that only a notable change to the economic outlook would prompt the central bank to slow the pace of tapering. More than $2.1 trillion has been added to the value of stocks worldwide this month on speculation the global economy is strong enough to withstand U.S. stimulus cuts.
Federal Reserve Bank of Cleveland President Sandra Pianalto said that cuts to stimulus can continue if the economy and employment market keep improving.
The S&P 500 (SPX) ended the U.S. session little changed at 1,845.16. The gauge has climbed above its closing record of 1,848.38 every day this week, only to retreat from that level by the end of the day. The index also came within six points of the record each day last week.
FTSE Outlook
Today is key for the bulls, simply. We are at the bottom of the various daily channels on both Bianca and Raff, and as such this a fairly key support are. The bulls need to get the price above 6818 initially, but from their point of view, above 6829 would be better if they are going to push on to higher levels.
Support wise today we have a ProTrend channel with support at the overnight low around 6771, and after that its 6752.
If the bulls can get above the daily pivot at 6806, which is likely to act as initial resistance, then 6829 is likely. With the daily channels around the 6780/6800 level on all of them (Bianca and Raff) then there is a chance of a bounce though the market (particularly the FTSE) does feel like its just treading water at the moment – tricky trading indeed.